On May 6, 2015, the governor signed Georgia Senate Bill 65, which made changes to several areas of the state’s commercial law. One of these changes was the repeal of UCC Article 6, Bulk Sales Transactions. The repeal becomes effective on July 1, 2015.

Bulk sales laws were enacted by many states in the late Nineteenth and early Twentieth Centuries to address a perceived problem with a particular type of fraud. It was believed that a merchant could acquire assets on credit, such as inventory, sell the assets in bulk, and then skip town. To prevent this type of fraud, bulk sales laws required the buyer of substantially all the assets of a business to follow a statutory notice process to protect creditors of the business. If the buyer failed to comply with the statutory requirements, then the transfer of assets could be declared ineffective and creditors of the seller could recover the goods or have a cause of action against the buyer.

The UCC originally included Article 6 to cover bulk sales. However, the widespread adoption of UCC Article 9 and improvements in communication technology rendered Article 6 almost entirely obsolete. In fact, there was little evidence that the type of fraud addressed by Article 6 had ever been a problem significant enough to warrant such a law. Consequently, the Uniform Law Commission recommended that states repeal Article 6. After July 1, 2015, only California, the District of Columbia and Maryland will still have of Article 6 in effect. Both California and the District of Columbia have tried unsuccessfully to repeal Article 6 in recent years. However, it is possible the repeal of Article 6 in Georgia will provide renewed momentum similar for efforts in those jurisdictions.

If you have questions or need more information, please contact Paul Hodnefield, Associate General Counsel, at paul.hodnefield@cscglobal.com or 800-927-9801, ext. 61730.